Royalty Pharma plc

Ladies and gentlemen, thank you for standing by. Welcome to the Royalty Pharma fourth quarter earnings conference call. I would like now to turn the conference over to George Grofik, Senior Vice President, Head of Investor Relations and Communications. Please go ahead, sir.

Good morning and good afternoon to everyone on the call. Thank you for joining us to review Royalty Pharma's fourth quarter and full year 2024 results. You can find the press release with our earnings results and slides to this call on the investors page of our website at royaltypharma.com. Moving to slide three, I would like to remind you that information presented in this call contains forward-looking statements that involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially from these statements. I refer you to our most recent 10-Q on file with the SEC for description of these risks. All forward-looking statements are based on information currently available to Royalty Pharma, and we assume no obligation to update any such forward-looking statements. Non-GAAP liquidity measures will be used to help you understand our financial results. The reconciliation of these measures to our GAAP financials is provided in the earnings press release available on our website. And with that, please advance to slide four. Our speakers on the call today are Pablo Legareta, Founder and Chief Executive Officer, Chris Height, EVP, Vice Chairman, Marshall Urist, EVP, Head of Research and Investment, and Terry Coyne, EVP, Chief Financial Officer. Pablo will discuss key highlights, after which Chris and Marshall will provide updates on our transaction pipeline and portfolio. Terry will then review the financials, and following concluding the march from Pablo, we will hold a Q&A session. And with that, I'd like to turn the call over to Pablo.

Thank you, George. And welcome to everyone on the call. It gives me great pleasure to report another successful year of execution against our strategy of the leading funder of innovation and life sciences. Moving to slide six, we're very proud of our achievements in 2024. We again delivered excellent financial performance and significantly enhanced our portfolio through strong capital deployment. We delivered portfolio receipts, our top line, of $2.8 billion for the year, which was at the high end of our guidance range. In underlying terms, this represents growth of 13% in royalty receipts and continues our track record of strong performance since our IPO. I should also point out that our 13% growth significantly exceeded our initial guidance of 5% to 9%. When we look to 2025, We're expecting portfolio receipts of 2.9 to 3.05 billion. In terms of our portfolio, we added royalties on eight new therapies, including four development-based therapies. We saw positive news across our portfolio, including FDA approvals of Voronego for brain cancer, Comamphi for schizophrenia, and Fernfire for ulcerative colitis. And FDA acceptance of the NDA for cytokinetics, Africampton, obstructive hypertrophic cardiomyopathy. In terms of capital allocation, we had a very attractive year for loyalty transactions, and we deployed capital of $2.8 billion to further broaden our portfolio, as well as $230 million on share repurchases. Last month, we announced an evolution in our capital allocation framework in which we will scale our buybacks depending on the discount of our share price to intrinsic value. As part of this, our board authorized a new $3 billion share repurchase plan, and our intention is to repurchase $2 billion in 2025. In the past month, we also generated over half a billion dollars in cash by monetizing the morphosis development funding bonds, which we will redeploy. Lastly, at the start of 2025, We announced a truly transformative step in the evolution of Royalty Pharma with a planned acquisition of our external manager to become an integrated company. We expect multiple strategic and financial benefits from this highly compelling internalization transaction, which we anticipate will close in the second quarter of this year. Moving to slide seven. This highlights the journey we have been on since I started the business in 1996. from a closed and serial fund to an ongoing business with an indefinite life, then moving through an expansion of our investment scope to our IPO in June of 2020. Last month's announcement of the internalization of the manager is the logical next step in our evolution and best positions Royal Pharma for future growth and shareholder value creation. Site A gives more background on Royal Pharma's current structure. The company has been externally managed since its creation in 1996. Under this structure, which is common among alternative asset managers, Royalty Pharma owns its unique industry-leading Royalty portfolio of more than 35 approved products and 14 development stage therapies, which include 15 blockbuster therapies, but it has no employees. Instead, it pays a management fee of 6.5% of portfolio receipts, its top line, to the manager, which in turn provides the platform. Following the internalization, the intellectual capital will transfer entirely to Royalty Pharma, and the company will integrate the employees and scale the investment platform into one entity. Importantly, now that Royalty Pharma will own the unique engine that drives future investment, we believe that Royalty Pharma shares to reflect the value of the world-class investment platform on top of the value of our one-of-a-kind portfolio on leading by pharmaceutical products. Slide nine provides more detail on the multiple benefits for shareholders from the internalization. Financially, we expect cash savings from extinguishing the management fee will accumulate over time. In 2026, we expect savings of over $100 million. Over the next 10 years, cumulative savings are expected to be greater than $1.6 billion. This compares to the total consideration of $1.1 billion. In addition, by ending the management fee, the net returns on royalty investments will increase for shareholders. Strategically, there are many important benefits. First, management and shareholders' alignment will be substantially strengthened, given the majority of the consideration will be paid in stock vesting for five years to nine years. Second, with all employees transferring to Royal Pharma, this ensures continuity of personnel and operations with a long-term equity vesting to maximize retention. Third, it enhances our commitment to robust governance practices. Lastly, simplification will increase comparability of Royal Pharma to other companies and enhance transparency. We think this transaction is highly compelling for shareholders and further strengthens our prospects for long-term value creation and success. With that, I will hand it over to Chris.